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21 January 2009

Getting reliable information when negotiating a deal

Have you negotiated with real estate agents before?

Remember, real estate agents represent the vendors (those selling the property) and are looking after their best interests. They have a legislative obligation to get the best possible result for the vendor, not the buyer.  If that's the case, why do we think we might get reliable answers from them? Yet most buyers rely on the agents for the majority of information about the property.

If you're buying property, how do you deal with this?

- Only ask the questions you need to ask. There's no point asking questions which reveal how you are positioned as a buyer. You may lose leverage when negotiating the deal.

- Try to use impartial sources of information to verify EVERYTHING!!! If a claim is made by a real estate agent, get an independent source of information to back it up. 

- Ask your questions (and write down the answers), then leave it for a couple of days.  Ring the agent again and ask some of the same questions again and see if you get the same answers. I'm always amazed at the number of inconsistencies.

Some interesting claims we've heard from agents:
1. "We just had a written offer of $1,250,000 but our client rejected it"
On a few occasions, we were able to prove that these offers were never in existence. Of course, agents will say this in an attempt to condition the buyer and make them believe that an offer should not start anywhere below that price.

2. "We had a contract for $875,000 but it fell through. I think it was due to finance"
We have seen a few of these, where the previous deals actually fell through due to the building and pest inspections.  Obviously, this is a fault of the property and not the previous buyer.  However, it's not in the best interest of the vendor, so is unlikely to get a mention.

3. "We've had two verbal offers"
Written offers are worth the paper they're written on.  Of course, they're very difficult to disprove.  However, when an agent says we've had 4 verbal offers and later says we've had 3. Well,... you get the picture.

4. "I'm pretty sure that's just cosmetic damage"
The words 'pretty sure' almost confirm it's going to be structural damage.

5. "My client has rejected your offer"
We've had cases where the vendors had never actually even seen the offer.  We have strategies to ensure we know when the vendors have seen the contract.

6. "It currently rents for $350, but it could easily fetch $450"
Yeah, sure.  If you demolished the house and erected  a new one in it's place!! Or perhaps they're talking about a rental figure in 3 years time. This is no lie, but they may not mention what needs to be done in order to achieve the $450.

7. "It's such a good bargain, I'm thinking about buying it myself"
Hmm...  I don't know where to begin with that one.

I won't go on, but you get the idea.

Make sure you don't accept all statements as fact. Be investigative in your approach and remember, Caveat Emptor or "Buyer Beware".

Yours in property!

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